January 03, 2007

International Bottled Water Association and Others File Suit to Protect

Chicago Retailers, Wholesalers, and Consumers from Tax on Healthy Beverage

Alexandria, Va. – The International Bottled Water Association (IBWA) today filed a lawsuit in Cook County Circuit Court to overturn a City of Chicago ordinance that imposes a regressive 5-cent-per-container tax on bottled water. Other plaintiffs in the suit include the Illinois Retail Merchants Association, the Illinois Food Retailers Association, and the American Beverage Association.

"The Chicago bottled water tax is a bad idea for many reasons," said IBWA President and CEO Joe Doss. "It is both unlawful and in violation of state’s Constitution and will significantly increase the cost of this healthy, safe product. The bottled water tax is regressive and will place an unfair burden on those who can least afford it: the City’s low and fixed-income citizens, including the elderly. It is the consumer who will ultimately bear the brunt and pay the tax, which will add about 30 percent to the cost of a case of bottled water."

Doss continued, "This narrowly focused, punitive tax will make it more difficult for consumers to drink bottled water, and that is not in the public interest. Bottled water is growing in popularity because of its consistent quality, taste and convenience. And many people choose it over other beverages because it does not contain calories, caffeine, sugar, artificial flavors or colors, alcohol or other ingredients consumers may wish to avoid or moderate." Levying a special tax on a healthy beverage such as bottled water could cause consumers to purchase other, less healthful, alternatives.

IBWA and fellow plaintiffs argue that the ordinance, which became effective on January 1, 2008, unlawfully taxes a food product, which is expressly prohibited by Illinois law. Furthermore, the Illinois State Constitution requires tax uniformity, meaning that a specific product cannot be taxed when other similar products are not. The bottled water tax does not include other packaged beverage products that are made mostly from water.

"The bottled water tax places an unlawful burden on retailers, ranging from small, locally owned grocers to the larger chain operations that employ thousands of Chicagoans and invest in the City’s economy with jobs, taxes, and development." Doss continued. "This tax just doesn’t make legal or fiscal sense and it will cause consumers to shop for bottled water outside city limits, thereby hurting Chicago’s retail and wholesale businesses. When companies are burdened by onerous taxes, they may look to relocate to more ‘business friendly’ areas. Leaving the tax in place will certainly have a negative impact on the 4,500 jobs and $270 million in wages for Chicagoans working in the bottled water industry."

Doss also noted, "Reasons cited for the tax have ranged from alleged environmental protection–although none of the tax revenue is earmarked for that purpose–to closing the City’s budget deficit. However, the $10.5 million in revenue anticipated by the City of Chicago through this tax is highly inflated. In fact, higher consumer prices for bottled water brought about by the increased tax could cause demand to subside, with a corresponding decrease in projected tax revenue."

The bottled water industry, like many others in the food and beverage industry, has taken actions to reduce its environmental footprint through the use of ever lighter weight packaging and direct support and involvement in recycling educational and advocacy programs. Bottled water is one of thousands of packaged foods and beverages-not to mention other consumer products–used by consumers every day. Bottled water containers are fully recyclable and should be properly recycled through whatever system a local municipality has in place. Any actions to reduce the environmental impact of packaging must focus on all consumer goods and not target any one industry.

"We hope that, in the end," Doss concluded, "Chicagoans will be able to choose the healthful benefits of bottled water consumption without added cost and measures that penalize smart beverage choices."

To view a copy of the filed complaint, click here.